Carbon Clear News

The worst performing sector is most likely to have an energy management system

There are many ways to see how well a company is doing at sustainability – CDP, DJSI, FTSE4Good, ISOs, Carbon Trust Standard etc. Sometimes it can all seem a bit overwhelming trying to understand what it means and whether a company is actually considering sustainability as part of its business strategy, or if it’s just applying stickers to cover a hole.

Our research into the FTSE 100 analyses what companies say they are doing about sustainability in their publicly available reporting. This makes it easy to check, understand and compare businesses’ performance.

The 2016 research shows that businesses with ISO 50001 energy system implemented don’t necessarily score well; in fact, manufacturing, machinery and engineering (MME) are near the bottom on the whole despite as a sector being far more likely to have ISO 50001, at least in part, than other sectors.

Energy costs, but so does climate change

These MME businesses are energy-intensive and having ISO 50001 enables them to continually assess their energy usage and find ways to reduce it. This is important as it means that these businesses see energy as a direct cost which comes off their bottom line, so significantly affecting profit if not monitored properly. However, they are not yet seeing wider sustainability as a cost, despite its potential to have a wide impact on these businesses, in terms of material availability, and the impact of climate change on both their markets and their supply chain. This means that assessing the risks to business of climate change should be an immediate focus for the sector.

How do you compare?

Peer pressure is a big factor in how many companies consider sustainability as part of their business – the success of our research is in FTSE companies wanting to know how they perform overall, and how well they are doing in terms of other companies in their sector. One key player, such as Marks and Spencer, can cause a step-change in the rest of the retail market. However, in MME businesses, having ISO 50001 is considered a requirement for winning tenders, but wider sustainability is not currently a major differentiating factor. The lack of peer pressure in this area, also makes companies less likely to report the good work they are doing, potentially leading them to score much lower than they actually deserve.

The wider sustainability strategy

While ISO 50001 requires the setting of targets, taking a longer-term view and setting science-based targets can help rationalise business thinking. MME businesses have a lot of moving parts, which can make it harder to look at sustainability as a whole. However, they are in a position where making changes can open whole new markets through innovative technologies and manufacturing items in a more sustainable way.

ISO standards can help businesses work out what needs to be done, and put in place a system according to defined guidelines to improve their businesses energy management or sustainability. These are important stepping-stones for businesses towards the beginning of their journeys. However, it’s increasingly necessary to look at the bigger picture and become more innovative in order to remain competitive. Carrying out materiality assessments and working closely with the supply chain helps unlock new ways of thinking and operating to make the whole business sustainable. Equally, wider communication enables customers to consider businesses more favourably and can create drive within the sector to improve as a whole, taking wider sustainability issues into account.